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December 24, 2009

Like teachers like bankers!!!

When it comes to criticizing Wall Street investment bankers, there may be few adjectives that have been spared in the last twelve months. However, it seems that the bankers are not the only ones to be blamed. Their alma mater has also got it all wrong when it came to judging risks. 'How to invest profitably' is not a lesson that only the bankers need to learn. The school that produces most of the Wall Street honchos has been one of the biggest victim of poor risk management.

We are referring to one of the most renowned business schools in the world - Harvard Business School. To fund its expansion plans, the school invested in interest swaps. In December 2004, the institution bought swaps on construction bonds worth US$ 2.3 bn. The Fed rates were then 2.25%. With the Fed slashing interest rates to near zero, Harvard University has had to bear losses of a staggering US$ 1 bn.

The crisis has taught some very important lessons. To the bankers and to their teachers!

What is this about?

It all started by a thought that crossed my mind in May 08. I completed 10 years of my job in Bangalore and it seemed that a technological generation gap had started emerging. Like the older generation who even today think that mobile phones are dispensable, I had not appreciated the power of e-communication!

As soon as you put your attention on some aspect of life, you start seeing only those things around you. There has been so much talk about celebrity blogs and also discovered that my teacher had taken this up. So here I am - presenting my thoughts and ideas. Happy reading and enjoy.